UK Life Sciences Executive Summary

The UK life sciences sector is undergoing a period of unprecedented growth. High-growth UK life sciences companies secured over £1.4bn in equity investment in 2020. 2020 was also a banner year for the incorporation of UK life sciences companies, with a 45% increase year-on-year in the number of companies incorporated in the UK, while the total value of proceeds achieved by UK life sciences IPOs was four-times greater in 2020 than the previous twelve months.  This is clearly a sector with momentum. Looking to the future, public and private investment, both major drivers of sector growth are ramping up. For example, in 2021-22 the UK Government will invest £14.6bn in R&D grants and facilities.

We expect both public and private investment to further accelerate as a direct result of Covid-19 and the UK’s role in leading the global response to the pandemic. This growth trajectory will fuel additional occupier demand from the life sciences sector over the next cycle.

Whilst naturally a lot of the buzz around life sciences focuses on this dramatic growth story, it is actually only one part of the picture. The sector is also transforming at pace and this will serve to bring new real estate requirements to the market. 

Technology, for example, is playing a critical role in the future transformation and success of the sector. Its application is creating a new breed of fast-growth occupiers as well as disruption-led demand from incumbents facing restructuring pressures.  These tech influenced life science companies will increasingly want to locate in city centre locations where the tech talent resides or gravitates towards. The recent siting of GSKs Artificial Intelligence (AI) team in the Knowledge Quarter, Kings Cross is testament to that.  

The application of technology in the sector is also driving huge growth in computational science with the consequence that a greater proportion of R&D is taking place in more conventional office space or dry lab space.

At the same time open innovation is being widely adopted, resulting in the geographic concentration of life sciences companies in leading ecosystems where collaborative partners and talent resides. The UK’s “Golden Triangle” is a clear hotspot, however clusters are also emerging across the UK and increasingly in in exciting innovation districts within city centres.  The geography of the sector is also being influenced by new investment in next wave manufacturing facilities. For example, in the latest budget statement, the UK Government committed an additional £5mn investment in clinical-scale mRNA manufacturing.

All of the above is having significant implications on both the supply and demand  side of real estate.

On the supply side, we are seeing more real estate developers, investors and landlords enter the market. The recent sale of assets at Cambridge Science Park demonstrates the heightened interest with the price achieved well above the original guide price. We are also seeing more enquiries relating to the repurposing of a range of property types towards dedicated life sciences facilities.

On the demand side, whilst recognising that the real estate needs of life sciences companies real estate vary greatly, recent market behaviour indicates that life sciences occupiers are looking to use their real estate to gain competitive advantage.  This is translating into demand for 24-hour amenities to service the needs of scientists who are doing highly concentrated work, flexible spaces to accommodate both current and future needs, as well as buildings that have outstanding ESG and wellbeing credentials alongside fast and reliable digital connectivity.  Location increasingly matters as occupiers gravitate towards developments that create, curate and cultivate a collaborative ecosystem either around specific themes, ideas or life sciences specialisms.

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